Why health and wellness may not include skin care for Nestlé

The Swiss food and beverage giant says it is mulling its current position in the skin care category, which will include a possible divestment of its Skin Health business to enhance its strategic focus.

The board of directors has confirmed that it in continuing to retrain its focus for the longer-term value creation strategy for its health and wellness strategy, it has concluded that skin care now appears to be more outside of its own strategic scope and resources.

Like both Proctor & Gamble and Unilever, which also have food and beverage as their mainstay businesses as well as considerable operations in the cosmetic and personal care space, the company is reassessing if skin care still adds enough value to its overall operations.

Proctor & Gamble made a series of significant acquisitions in the early 2000s, which helped to expand its footprint into the cosmetics and personal care business, but the expansion was too fast, resulting in an overstretched and bloated business that became harder to manage and less profitable.

Ultimately P&G has has had to trim down its business portfolio and retrain its focus. Nestle’s operations in the skin care segment are far smaller by comparison, but divesting this side of the business could provide significant funds to reinvest into a health and wellness portfolio that is more aligned with its business focus.

Testing out the water​

Despite Nestlé’s Skin Health operation being category relatively small by multinational standards, if the decision to divest the business goes ahead, it could still raise significant funds to reinvest in the core business.

Going to the next level in the decision-making process, the board says the operations the Nestlé Skin Health division will be carefully assessed to determine the best strategic options, with the aim of making a full review of the situation made known by mid-2019.

The company already offers a range of medical and consumer brands that touch on skin health through three existing complementary business units, that include Epiduo and Soolantra, representing the prescription area, as well as Restylane and Azzalure in aesthetics and Cetaphil and Proactiv in the consumer care area.

Expansion of the Skin Health business could be weaved into many different areas of the Nestlé Skin Health business, which currently includes 5,000 employees across 40 different countries.

The Skin Health business also includes an extensive research and development resources spread across the globe that help contribute to division sales that totaled CHF 2.7 billion in 2017.

Tapping into the personalised approach​

In recent years, growth in the skin care category has been very much focused on providing more targeted solutions that tap into individual skin care needs, while also providing a higher level of scientific development and know how to create more effective products.

The Nestlé Skin Health business division undoubtedly has a significant research and development team, combined with a global operation that provides a diverse brand portfolio offering highly targeted and specialized solutions.

It also fits the bill for more targeted and personalised skin care brands, particularly for the Restylane and Azzaulure names, which target the fast-growing skin booster category, while Cetaphil and Proactiv are both dermatological brands targeting acne and problem skin.

All of this means that, whether the business is sold off as a whole, or divided up, it is likely to generate significant interest from investors and is could well attract a high price tag if the decision is made to sell next year.